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"Not YOUR Coins" - Lawyers see customer funds as possession of Celsius



 The 1.7 million users of crypto platform Celsius, spread across the globe, have ceded ownership of the crypto funds they transferred by using the service provider’s crypto yield accounts, as the bankrupt firm’s lawyers now do argue.


During Celsius's first bankruptcy hearing on Monday, its attorneys at Kirkland law firm Pat Nash raised concerns that the savings platform's customers who have used the income accounts service may, under the Terms of Service (TOS), own the and have transferred usage rights to their coins. Accordingly, Celsius was allowed to “use, trade, sell and lend” customer funds at will.

The different Celsius accounts and their legal status.

With regard to crypto assets held in certain custody accounts at Celsius, however, the legal situation appears to be much more diffuse. The terms and conditions of the platform actually state that coins in custody accounts cannot be used without the explicit consent of Celsius users. Nonetheless, the company's lawyers question whether the company still has ownership of those funds:


“Do the crypto assets that Celsius own belong to the company? In answering this question, can a distinction be made between crypto assets in custody and in income accounts?”

Since June 13, Celsius has imposed a payout freeze after the crypto company has been severely troubled by the current bear market. Investors can therefore initially no longer withdraw funds.


Attorney David Silver summarizes Celsius' reasoning on Twitter. He soberingly notes that by now, users “shouldn’t think it’s *their* crypto assets, because technically they’re company funds.”



Meanwhile , Kadhim Shubber, a reporter from the Financial Times, cautioned that according to Celsius attorney Nash, it is “in the best interest of users to wait out this crypto winter” and let Celsius handle the funds instead. This would allow users of the platform to “help rebuild and benefit from the appreciation that comes as crypto market sentiment improves.”

The company also argues that it can also sell Bitcoin ( BTC ), which is mined by a subsidiary. In the bankruptcy application, Celsius CEO Alex Mashinsky had calculated that the subsidiary would create almost 15,000 BTC by 2024, but David Silver doubts these figures.


Following the bankruptcy hearing , Silver commented on Twitter that the crypto savings platform is unlikely to be primarily a mining company these days:


“It's actually hard to believe that Patrick Nash and the Kirkland attorneys are now claiming that Celsius is essentially a mining company. That's total nonsense."

It remains unclear whether the Bitcoin German Nuri customers who have kept an income account with Celsius via the Neobank have also transferred their funds to the crypto savings platform according to this logic.  

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